The World Bank Group said in its Global Economic Prospects report for 2015 that developing countries are going to experience a financial breather thanks to weakening oil prices, stronger US dollar, decreasing global interest rates, and the downward trends in large emerging economies.
The Bank projected the global economy to grow by 3 percent in 2015, 3.3 percent in 2016, but slow down to 3.2 percent in 2017. Developing countries, however, are forecasted to experience a steady growth of 4.8 percent in 2015, 5.3 percent in 2016 and 5.4 percent in 2017.
To ensure continued economic growth, the Bank’s president, Jim Yong Kim advised countries to eliminate hindrances to investments in the private sector, which is the greatest source of jobs.
The report however warns of several risks. The first one is the weakening global trade. The Bank said that some would win while others lose due to the oil price meltdown. Meanwhile, the US and UK economies might be picking up as unemployment woes ease and monetary policies produce positive results. However, the Euro Area and Japan continue struggling out of the recent slump, as China’s growth rate slows down albeit remaining robust.
The second risk is the likelihood of volatility in the financial market caused by the predicted rise in interest rates in major economies. This year however, increases in the Federal Reserve’s rates are estimated to be modest. As the US dollar strengthens and the global economies weaken, US exporters are likely to suffer financially.
The Bank warns of the damage the oil price collapse would cause to oil-producing countries, particularly those who are also experiencing socio-political crises. Meanwhile oil-importing countries such as India, Brazil, Turkey and South Africa are seeing substantial improvements in their current account and fiscal balances. However, continued low oil prices will slow down exporting economies such as Russia.
The fourth risk involves the extended devaluation in the Euro Area and Japan. As for the rest of Asia and Europe, there will be slowed growth with improvements in developing countries offset by the stagnation in the Euro Area and Japan.
The Bank recommends that countries should impose more credible policies and reform-oriented administrations in order to benefit from the opportunities and to survive the challenges in 2015, as well as the years ahead.